Posted On: Nov. 1, 2018
Should I Have Multiple Types of Life Insurance?
Choosing a life insurance policy that best suits your needs can be confusing and a bit intimidating upon first inspection, especially if you’re looking for a policy that protects your family and loved ones after you pass away. With so many different types of life insurance options available to you, such as term life insurance, universal life coverage, a final expense policy and mortgage protection coverage, the best solution to meet your needs might involve purchasing two or more different policy types.
Learning more about the different types of policies available to you and comparing their benefits can go a long way when deciding what coverage best compliments your lifestyle. Whether you choose a mix of benefits or just one policy, we have life insurance agents in the Asheville area, and across the nation, that are excited to help you build a plan and create a strong safety net for your loved ones.
Life Insurance Basics
All life insurance policies are designed to pay a policy benefit when the insured person dies, as long as the policy was in effect during the time of the insured person’s death. There are many reasons for buying life insurance coverage, but the most common reasons include:
- Paying final expenses, including funeral/memorial service costs, cremation/burial, taxes, final medical bills, etc.
- Replacing the insured person’s income, which can help support your spouse and/or dependents, so they don’t need to change their standard of living
- Paying off debts like mortgages, credit cards, private student loans, etc.
- Creating a legacy for future generations
- Funding philanthropic causes by leaving proceeds to charitable beneficiaries
- Creating liquidity to pay estate taxes
- Funding business “buy/sell” agreements
Your personal reasons for wanting to buy life insurance might include one or more of these.
Understanding Different Types of Policies
Different types of life insurance products work differently. When you’re trying to decide what type of policy to purchase, you should understand what you’re buying. Here’s a brief overview of several common types of products.
Think of term life insurance as insurance protection you’re renting for a certain period of time. If you take out a 20-year term insurance policy, pay your premiums when due, and die after 19 years, your named beneficiary will receive the proceeds under the policy. If, however, the policy expires at the end of the 20 years and you die sometime after that, your beneficiaries will not receive anything because the life insurance is no longer in force.
Universal life coverage is designed to be “permanent” insurance. That means that if the premiums paid under the policy are enough to keep paying the cost of insurance, you’ll have coverage until the policy’s maturity date (often age 100 or sometimes even higher.) In addition to offering pure life insurance protection, universal life policies also come with a cash value account that can be used for any purpose.
It’s no secret that funeral costs can be expensive. Final expense policies provide your named beneficiary with funds that can be used to pay for your funeral or memorial, cremation or burial, and other expenses like taxes, medical bills, etc.
If you have an outstanding mortgage on your home, you might benefit from buying mortgage protection coverage . A mortgage protection policy is designed to provide your loved ones with the funds they need to pay off your mortgage balance if you still owe on it when you die.
Why Consider Buying Multiple Policies?
Unlike other types of insurance coverage, it is perfectly legal to buy multiple life insurance policies. In fact, many people choose to buy more than one policy and more than one type of insurance coverage. Some reasons for this include:
Buying what’s affordable
Working with your insurance agent, you may discover you need $1 million or more in life insurance protection to replace your income, help pay for your children’s education, pay off your mortgage and other debts, etc. If the premiums on a $1 million universal life insurance policy are out of reach, your insurance agent may suggest buying a combination of universal life and more affordable term coverage to help you meet your insurance needs. While the term policy will expire, it’s likely that your insurance needs will be different at the end of that policy term too.
Your insurance agent might also suggest you take a “ladder” approach to buying term life insurance. With this approach, you intentionally buy policies with different policy terms to meet different insurance needs. You might take out a 30-year policy designed to help cover your income until you retire, a 20-year policy to pay off the rest of the mortgage on your home, and a 10-year policy that could help fund your children’s college education if you die prematurely.
Supplement employer-sponsored policies
You may also want to consider buying more than one policy to ensure continuity of coverage. Sometimes, people who have life insurance through their employers assume they don’t need to buy additional insurance policies. However, employer-sponsored coverage is usually not “portable.” That means that if you voluntarily leave your company or if your job ends, you could find yourself without any life insurance protection. Buying a private insurance policy can help make sure your loved ones are always protected, no matter what happens with your job in the future.
Considerations and Limitations
While you can legally buy more than one life insurance policy, you cannot buy more coverage than you need. When you apply for coverage, the insurance company will ask about any existing life insurance policies you have in force and whether you intend to replace them or supplement them with the new policy.
The total amount of insurance you can buy is generally a generous figure, calculated as a multiple of your current income plus other financial needs such as the amount of your outstanding debt, family members you’re supporting, and more. Most people don’t need to worry about a policy application being denied because they have too much insurance, however it can happen in rare cases. For example, if you have an annual income of $30,000 and don’t have any outstanding debt or dependents, chances are you would not qualify to buy $3 million in life insurance coverage.
Let Symmetry Financial Group Help You Meet Your Insurance Needs
At Symmetry Financial Group, our Independent Insurance Agents understand insurance. We’re passionate about helping our clients protect their loved ones through life insurance, and we’ll work closely with you to help tailor coverage designed to do what you need it to do.
To learn more, and to get free life insurance quotes, contact us today.